MERRILL
LYNCH
INTERNATIONAL
EQUITY FUND
Semi-Annual Report November 30, 1993
This report is not authorized for use as an offer of sale
or a solicitation of an offer to buy shares of the Fund
unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this report should
not be considered a representation of future performance.
Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their
original cost.
Merrill Lynch
International Equity Fund
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH INTERNATIONAL EQUITY FUND
International Stock Market Performance
Total Return in US Dollars* of the Fund's Top Ten Country
Positions for the Four-Month Period Ended November 30, 1993
Source: Financial Times--Actuaries Index.
[FN]
*For the four-month period ended November 30, 1993,
total investment return for the Financial Times--Actuaries World
(Ex-US) Index was -4.29%.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX: ITEM 1.
DEAR SHAREHOLDER
Welcome to Merrill Lynch International Equity Fund. In this and
future reports to shareholders, we will review the Fund's
performance and describe our investment strategies for the period
under review. The Fund seeks capital appreciation and,
secondarily, income by investing in a diversified portfolio of
equity securities of issuers located in countries other than the
United States, and was designed for investors seeking to
complement their US holdings through foreign equity investments.
<PAGE>
The Fund commenced operations on July 30, 1993 with net assets of
$131.0 million. By November month-end, the Fund's net assets had
risen to $509.0 million. Since inception through November 30, the
total returns for Class A and Class B Shares were +3.10% and
+2.90%, respectively, compared to a decline of 4.3% in the
unmanaged Financial Times--Actuaries (FT-A) World (Ex-US) Index.
(For complete performance information, including aggregate total
returns, see page 4 of this report to shareholders.)
Portfolio Matters
Although international equity markets are generally expensive by
most valuation measures, we maintain a positive investment
outlook. Falling global consumer price inflation will continue to
encourage easy monetary policies and buoyant liquidity
conditions. We anticipate continued stock market volatility as
the tension between high valuations and abundant liquidity
intensifies. As a result, we may increase the Fund's cash
reserves somewhat as we look for opportunities to invest during
stock market setbacks. However, since the Fund's inception, our
primary focus has been to fully invest the Fund's assets in
international equities. At the end of November the Fund's cash
reserves accounted for approximately 10% of net assets, with the
balance invested in non-US stocks. The portfolio is overweighted
relative to the FT-A World (Ex-US) Index in Europe and, by
country, in Germany (7.2% of net assets at the end of November),
Switzerland (7.1%) and the Netherlands (5.4%). We are also over-
weighted in Hong Kong (8.5%) and Mexico (6.1%). At the end of
November, the Fund also had large holdings in the United Kingdom
(12.5%) and Japan (22.9%). Strategically, our policy objectives
are to overweight emerging stock markets and to significantly
hedge the Fund's Japanese and European currency exposures back
into US dollars.
Pacific Basin Investments
Although the Fund's exposure to the Japanese stock market is
significant, the portfolio is substantially underweighted in
Japan and overweighted in the Hong Kong and Australian stock
markets. The Japanese stock market declined approximately 16%
since the Fund's inception through November month-end, reflecting
the combined impact of poor corporate earnings, continued
economic deflation and apparent political indecision. We are now
gradually building our exposure to Japanese equities, since we
believe that monetary policy will ease further and many companies
have begun to restructure. As we have mentioned, our yen exposure
is largely hedged back into US dollars.
<PAGE>
The Hong Kong stock market has risen by over 30% since July,
benefiting from US inflows, buoyant domestic liquidity and
improving perceptions of relative value. Despite likely ongoing
political uncertainty and a shift toward tighter monetary policy,
we believe that the Hong Kong stock market's long-term prospects
are outstanding. We have also added to positions in Australia and
New Zealand, two markets which are likely to benefit from a
continued economic recovery. Valuations in these stock markets
remain attractive relative to much of Southeast Asia.
European Investments
The Fund has established significant exposure to European stocks
that we believe will benefit from lower European interest rates
and a stronger US dollar. We have also invested in companies that
have aggressively engaged in corporate restructurings. The
combined impact of these factors and strong US liquidity inflows
have led to significant outperformance of the German, Swiss and
Dutch stock markets, all of which are up over 10% in the last
five months. We expect to retain overweighted positions in these
key stock markets since we expect further interest rate cuts and
US dollar strength. More recently we have gained significant
additional exposure to Belgium and Ireland, where valuations
remain attractive. Prior to the budget announcement we increased
the Fund's exposure to the United Kingdom, purchasing several
stocks likely to benefit both from the consumer and cyclical
recoveries.
During the period under review, we took advantage of US dollar
weakness to substantially hedge against the risk of declining
European currencies relative to the US dollar. With the exception
of the pound sterling and the lira, we retain a strategic bias
toward the US dollar relative to European currencies.
Latin American Investments
The Fund has a significant exposure to the Mexican stock market.
Improving inflation and a gradual lowering of interest rates
combined with attractive valuations suggest ongoing strong equity
performance. For the four months ended November 30, Mexican
equity prices rose by 29%. Following the passage of the North
American Free Trade Agreement by the US Congress, we believe that
positive long-term prospects will attract continued liquidity
inflows into Mexican stocks. Elsewhere in Latin America we have
established core holdings in Argentina and Brazil, and we expect
that the Fund's investments in the region will increase further
in 1994.
In Conclusion
In our view, the global economic recovery will continue to be
muted and consumer price inflation pressures subdued. Outside of
the dollar-bloc countries and the People's Republic of China,
monetary policy is likely to ease further; interest rate cuts
will likely support share prices. We believe that the best
opportunities lie ahead in Europe and Latin America. In addition,
we plan to accumulate investments in Japan on further weakness.
<PAGE>
We thank you for your investment in Merrill Lynch International
Equity Fund, and we look forward to serving your financial needs
in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Andrew John Bascand)
Andrew John Bascand
Vice President
Senior Portfolio Manager/Asset Allocator
(Adrian C. Holmes)
Adrian C. Holmes
Co-Portfolio Manager--European Investments
(Grace Pineda)
Grace Pineda
Co-Portfolio Manager--Emerging Markets Investments
(Stephen I. Silverman)
Stephen I. Silverman
Co-Portfolio Manager--Pacific Basin Investments
January 4, 1994
PERFORMANCE DATA
None of the past results shown should be considered a representation of future
performance. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
<TABLE>
Recent Performance Results*
<CAPTION>
Since Inception 3 Month
11/30/93 8/31/93 7/30/93** % Change % Change
<S> <C> <C> <C> <C> <C>
ML International Equity Fund Class A Shares $10.31 $10.26 $10.00 +3.10% +0.49%
ML International Equity Fund Class B Shares 10.29 10.26 10.00 +2.90 +0.29
ML International Equity Fund Class A Shares--Total Return +3.10 +0.49
ML International Equity Fund Class B Shares--Total Return +2.90 +0.29
Financial Times--Actuaries World (Ex-US) Index++--Total Return -4.29 -8.60
<FN>
*Investment results shown for the 3-month and since inception
periods are before the deduction of any sales charges.
**Commencement of Operations.
++An unmanaged capitalization-weighted index comprised of over
1,800 companies in 24 countries, excluding the United States.
</TABLE>
<PAGE>
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (7/30/93)
through 9/30/93 +1.30% -5.28%
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return Without % Return With
CDSC CDSC**
Class B Shares*
Inception (7/30/93)
through 9/30/93 +1.20% -2.80%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Value Percent of
Industries Shares Held Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
LATIN AMERICA
Argentina
Banking 109,425 Banco de Galicia y Buenos Aires S.A. (ADR)(a) $ 2,983,033 $ 3,446,888 0.7%
Total Investments in Argentinean Stocks 2,983,033 3,446,888 0.7
Brazil
Telecommunications 12,669,200 +++Telecomunicacoes Brasileiras S.A.--Telebras
PN (Preferred) 476,480 443,478 0.1
75,100 Telecomunicacoes Brasileiras S.A.--Telebras PN
(Preferred)(ADR)(a) 2,478,840 2,712,612 0.5
------------ ------------ -----
2,955,320 3,156,090 0.6
Total Investments in Brazilian Stocks 2,955,320 3,156,090 0.6
Chile
Building & Construction 55,000 Maderas y Sinteticos S.A. (MASISA)(Sponsored)(ADR)(a) 977,412 1,093,125 0.2
Total Investments in Chilean Stocks 977,412 1,093,125 0.2
<PAGE>
Mexico
Banking 14,700 +++Grupo Financiero Bancomer, S.A. de C.V. (ADR)(a) 499,800 518,175 0.1
350,000 Grupo Financiero Bancomer, S.A. de C.V. 'B' 499,822 462,829 0.1
104,700 +++Servicios Financieros Quadrum, S.A. de C.V.
(ADR)(a) 1,982,811 2,552,063 0.5
------------ ------------ -----
2,982,433 3,533,067 0.7
Beverages 298,000 Fomento Economico Mexicano, S.A. de C.V. (Femsa) 1,671,325 1,788,000 0.4
386,000 +++Fomento Economico Mexicano, S.A. de C.V.
(Femsa)(Class B)(ADR)(a) 2,097,877 2,334,301 0.5
------------ ------------ -----
3,769,202 4,122,301 0.9
Building &
Construction 196,000 Cementos Mexicanos, S.A. de C.V. Nom 'B' (Cemex) 4,025,545 5,107,821 1.0
130,000 Grupo Tribasa, S.A. de C.V. (ADR)(a) 2,015,000 3,185,000 0.6
------------ ------------ -----
6,040,545 8,292,821 1.6
Diversified 563,000 ++Grupo Carso, S.A. de C.V., Series A 4,112,559 4,975,391 1.0
Leisure 23,000 +++Grupo Posadas, S.A. de C.V. (GDS)(b) 374,750 368,000 0.1
Retail Stores 921,000 Cifra, S.A. de C.V. (Class C) 2,498,768 2,554,620 0.5
Telecommunications 116,100 Telefonos de Mexico, S.A. de C.V. (Telmex) (ADR)(a) 6,437,231 6,472,575 1.3
Total Investments in Mexican Stocks 26,215,488 30,318,775 6.1
Panama
Beverages 3,200 PanAmerican Beverages Inc. (Class A) 81,600 116,400 0.0
Total Investments in Panamanian Stocks 81,600 116,400 0.0
Venezuela
Foods 300,000 Mavesa S.A. (Ordinary) 137,354 133,617 0.0
Total Investments in Venezuelan Stocks 137,354 133,617 0.0
Total Investments in Latin America 33,350,207 38,264,895 7.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Industries Shares Held Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
PACIFIC BASIN
Australia
Engineering &
Construction 1,870,000 Australia National Industries, Ltd. (Ordinary) $ 2,382,622 $ 2,318,538 0.5%
Food & Beverage 891,200 Burns Philp & Co. Ltd. (Ordinary) 2,617,203 2,439,148 0.5
524,819 Coca-Cola Amatil, Ltd. (Ordinary) 3,141,532 3,253,510 0.6
------------ ------------ -----
5,758,735 5,692,658 1.1
Insurance 1,155,958 GIO Australia Holdings Ltd. 2,249,104 2,294,686 0.4
Property 346,000 Lend Lease Corp. 4,026,608 3,984,145 0.8
Utilities--Gas 495,967 The Australian Gas Light Co. (Ordinary) 1,243,557 1,520,970 0.3
Total Investments in Australian Stocks 15,660,626 15,810,997 3.1
Hong Kong
Automobiles 2,912,000 Denway Investment (Ordinary) 668,321 791,663 0.2
Banking 2,000,000 J.C.G. Holdings 1,299,303 1,592,336 0.3
3,068,000 Winton Holdings 1,174,524 1,141,886 0.2
------------ ------------ -----
2,473,827 2,734,222 0.5
Diversified 1,980,000 Citic Pacific Ltd. (Ordinary) 5,086,910 5,177,811 1.0
Foods 4,925,000 C.P. Pokphand Co., Ltd. (Ordinary) 1,492,616 1,992,443 0.4
Miscellaneous 30,827 Consolidated Electric Power Ltd. (Ordinary) 49,885 49,885 0.0
Property 2,588,000 Hang Lung Development Co., Ltd. (Ordinary) 4,128,204 4,657,026 0.9
4,100,000 Hopewell Holdings, Ltd. 3,529,887 4,697,391 0.9
------------ ------------ -----
7,658,091 9,354,417 1.8
Publishing 2,050,000 Oriental Press Holdings (Ordinary) 954,980 1,552,528 0.3
Real Estate 5,300,000 Sun Hung Kai Properties, Ltd. (Ordinary) 2,987,728 3,121,885 0.6
Telecommunications 2,638,000 Hong Kong Telecommunications Ltd. (Ordinary) 4,492,512 5,020,208 1.0
<PAGE>
Utilities 1,830,000 The Hong Kong & China Gas Co. (Ordinary) 3,963,130 4,548,644 0.9
Utilities--Electric 1,551,600 China Light & Power Co., Ltd. (Ordinary) 7,552,276 9,139,465 1.8
Total Investments in Hong Kong Stocks 37,380,276 43,483,171 8.5
Japan
Automobiles 643,000 Suzuki Motor Co. (Ordinary) 5,629,757 5,671,444 1.1
Beverages 92,000 Chukyo Coca-Cola Bottling Co., Ltd. (Ordinary) 1,310,757 1,031,239 0.2
106,000 Hokkaido Coca-Cola Bottling Co., Ltd. (Ordinary) 1,754,547 1,548,512 0.3
102,000 Kinki Coca-Cola Bottling Co., Ltd. (Ordinary) 1,893,379 1,686,880 0.3
109,000 Mikuni Coca-Cola Bottling Co., Ltd. 2,058,813 1,812,661 0.4
111,000 Sanyo Coca-Cola Bottling Co., Ltd. 1,874,646 1,519,570 0.3
------------ ------------ -----
8,892,142 7,598,862 1.5
Capital Goods 1,044,000 Mitsubishi Heavy Industries, Ltd. 6,829,751 5,745,645 1.1
Consumer Electronics 514,000 Matsushita Electric Industrial Co., Ltd. 6,884,671 6,422,639 1.3
23,900 Nintendo Co., Ltd. 2,225,083 1,394,386 0.3
------------ ------------ -----
9,109,754 7,817,025 1.6
Electric Construction 145,000 Chudenko Corp. (Ordinary) 5,515,540 5,009,188 1.0
319,000 Sanki Engineering Co., Ltd. 4,654,758 3,487,780 0.7
170,000 Taihei Dengyo Kaisha, Ltd. 4,212,638 3,639,287 0.7
------------ ------------ -----
14,382,936 12,136,255 2.4
Electrical Equipment 164,000 Murata Manufacturing Co., Ltd. 5,306,131 5,273,796 1.0
478,000 Sumitomo Electric Industries Ltd. 5,975,862 5,006,615 1.0
280,000 The Nippon Signal Co., Ltd. 4,194,965 3,344,359 0.7
------------ ------------ -----
15,476,958 13,624,770 2.7
Iron & Steel 150,000 Maruichi Steel Tube, Ltd. (Ordinary) 2,867,531 2,466,924 0.5
Office Equipment 502,000 Canon, Inc. (Ordinary) 6,830,982 6,318,817 1.2
Packaging 270,000 Toyo Seikan Kaisha, Ltd. (Ordinary) 7,945,683 6,772,326 1.3
Pharmaceutical 233,000 Sankyo Co., Ltd. (Ordinary) 6,209,166 5,116,409 1.0
210,000 Taisho Pharmaceutical Co., Ltd. (Ordinary) 4,328,178 3,897,464 0.8
------------ ------------ -----
10,537,344 9,013,873 1.8
Photography 187,000 Fuji Photo Film Co., Ltd. 4,608,001 3,882,947 0.8
Property & Casualty 833,000 Dai-Tokyo Fire & Marine Insurance Co., Ltd. 6,527,106 5,663,543 1.1
<PAGE>
Insurance 684,000 Fuji Fire & Marine Insurance Co., Ltd. 4,786,714 3,896,362 0.8
836,000 Koa Fire & Marine Insurance Co., Ltd. 5,976,357 4,762,220 0.9
970,000 Nichido Fire & Marine Insurance Co., Ltd. 7,697,403 5,721,610 1.1
377,000 Sumitomo Marine & Fire Insurance Co., Ltd. 3,374,142 2,944,230 0.6
614,000 Tokio Marine & Fire Insurance Co., Ltd. 7,728,106 6,261,852 1.2
------------ ------------ -----
36,089,828 29,249,817 5.7
Retail Sales 126,000 Ito-Yokado Co., Ltd. (Ordinary) 5,941,895 6,100,882 1.2
Total Investments in Japanese Stocks 135,142,562 116,399,587 22.9
Malaysia
Leisure 157,000 Genting BHD 1,450,561 1,657,608 0.3
700,000 Magnum Corp. BHD 1,427,440 1,669,730 0.3
------------ ------------ -----
2,878,001 3,327,338 0.6
Steel 1,032,000 Maruichi Malaysia Steel Tube BHD 2,616,958 2,219,528 0.4
Telecommunications 243,000 Telekom Malaysia BHD 1,586,715 1,824,424 0.4
118,000 Uniphone Telecommunications BHD 462,197 595,237 0.1
------------ ------------ -----
2,048,912 2,419,661 0.5
Total Investments in Malaysian Stocks 7,543,871 7,966,527 1.5
New Zealand
Telecommunications 60,000 Telecom Corporation of New Zealand (Class C)(ADR)(a) 2,698 682 2,565,000 0.5
Total Investments in New Zealand Stocks 2,698,682 2,565,000 0.5
Singapore
Banking 315,000 United Overseas Bank Ltd. (Foreign Registered) 2,262,524 2,540,005 0.5
Total Investments in Singaporean Stocks 2,262,524 2,540,005 0.5
Thailand
Banking 369,100 Bangkok Bank Co., Ltd. (Foreign Registered) 2,591,948 2,959,764 0.6
Total Investments in Thai Stocks 2,591,948 2,959,764 0.6
Total Investments in the Pacific Basin 203,280,489 191,725,051 37.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Industries Shares Held Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
SOUTHEAST ASIA
India
Insurance 48,200 Grasim Industries Limited (ADR)(a) $ 815,815 $ 855,550 0.2%
Total Investments in Indian Stocks 815,815 855,550 0.2
Total Investments in Southeast Asia 815,815 855,550 0.2
WESTERN EUROPE
Austria
Utilities 13,629 Energie-Versorgung Niederoesterreich AG 1,340,508 1,633,041 0.3
24,555 Verbund Oesterreichische Elekrizitats AG 1,362,079 1,438,547 0.3
------------ ------------ -----
2,702,587 3,071,588 0.6
Total Investments in Austrian Stocks 2,702,587 3,071,588 0.6
Belgium
Banking 8,100 Generale de Banque S.A. (Ordinary) 1,978,003 2,008,264 0.4
Chemicals 3,200 Solvay Group (Ordinary) 1,240,133 1,260,606 0.2
Foods 34,000 GIB Group (Bearer) 1,200,598 1,256,970 0.2
Metal & Mining 19,801 Union Miniere N.V. 1,306,574 1,232,790 0.2
5,177 Union Miniere N.V. (Warrants)(c) 0 32,089 0.0
------------ ------------ -----
1,306,574 1,264,879 0.2
Total Investments in Belgian Stocks 5,725,308 5,790,719 1.0
Denmark
Banking 7,360 Den Danske Bank AF (Ordinary) 375,263 401,066 0.1
Total Investments in Danish Stocks 375,263 401,066 0.1
Finland
Paper &
Forest Products 306,500 Enso-Gutzeit OY 1,987,636 1,954,471 0.4
43,900 ++Metsa Serla OY 1,721,368 1,693,179 0.3
107,900 Repola OY S 1,627,001 1,672,037 0.3
------------ ------------ -----
5,336,005 5,319,687 1.0
Total Investments in Finnish Stocks 5,336,005 5,319,687 1.0
France
Automobiles 19,750 Peugeot S.A. 2,314,748 2,339,976 0.5
<PAGE>
Banking 23,720 Compagnie Financiere de Paribas 2,018,937 1,838,915 0.4
35,300 Compagnie Financiere de Suez (Ordinary) 2,018,337 2,016,803 0.4
19,000 Societe Generale de Surveillance S.A.
(Class A)(Ordinary) 2,052,425 2,251,117 0.4
------------ ------------ -----
6,089,699 6,106,835 1.2
Chemicals 37,800 Rhone-Poulenc S.A. 933,807 946,035 0.2
Consumer--
Miscellaneous 21,000 Christian Dior S.A. 1,296,657 1,164,406 0.2
Media/Publishing 29,000 Matra Hachette (Ordinary) 719,726 684,250 0.1
Oil--Related 28,000 Societe Nationale Elf Aquitaine (Ordinary) 2,046,602 1,928,171 0.4
Petroleum 40,500 Total S.A. (Class B) 2,047,886 2,059,299 0.4
Retail Trade 17,150 Pinault Printemps S.A. 2,053,184 2,384,554 0.5
Total Investments in French Stocks 17,502,309 17,613,526 3.5
Germany
Automobiles 2,202 Bayerische Motorenwerke AG (BMW)(Bearer) 722,839 783,127 0.2
5,529 Daimler-Benz AG 2,432,057 2,303,857 0.5
16,242 Volkswagen AG (Preferred Warrants)(c) 1,411,388 1,396,744 0.3
3,815 Volkswagen AG (Preferred) 711,409 733,996 0.1
------------ ------------ -----
5,277,693 5,217,724 1.1
Banking 11,867 Deutsche Bank AG (Ordinary) 5,773,552 5,860,162 1.1
Building &
Construction 954 Hochtief AG 614,240 570,108 0.1
Chemicals 15,212 BASF AG (Ordinary) 2,448,022 2,403,482 0.5
20,996 Bayer AG (Ordinary) 3,801,567 4,039,576 0.8
------------ ------------ -----
6,249,589 6,443,058 1.3
Health &
Personal Care 6,314 Schering AG 3,628,348 3,895,449 0.8
Insurance 3,650 Allianz AG Holding (Warrants)(c) 140,309 220,251 0.0
Machinery 68,200 Kloeckner Werke AG 3,365,767 4,111,404 0.8
10,000 Man AG (Ordinary) 1,946,489 2,139,692 0.4
12,976 Mannesmann AG (Ordinary) 2,320,918 2,805,213 0.5
------------ ------------ -----
7,633,174 9,056,309 1.7
<PAGE>
Metal & Mining 15,360 Thyssen AG (Ordinary) 1,933,747 2,126,866 0.4
Utilities 10,106 Veba Vereinigte Elektrizitaets & Bergwerks
AG (Ordinary) 2,415,178 2,686,174 0.5
15,000 Veba (Warrants)(c) 850,851 1,206,856 0.2
------------ ------------ -----
3,266,029 3,893,030 0.7
Total Investments in German Stocks & Warrants 34,516,681 37,282,957 7.2
Greece
Beverages 29,810 Hellenic Bottling Company 792,760 824,351 0.2
Total Investments in Greek Stocks 792,760 824,351 0.2
Ireland
Banking 498,000 Bank of Ireland (Ordinary) 1,939,145 2,028,149 0.4
Building &
Construction 610,000 CRH PLC (Ordinary) 2,870,247 2,982,854 0.6
Total Investments in Irish Stocks 4,809,392 5,011,003 1.0
Italy
Diversified 2,969,500 Compagnie Industrial Riunite S.p.A. (CIR) 2,777,436 2,455,749 0.5
Paper & Forest
Products 235,550 Cartiere Burgo S.p.A. (Ordinary) 1,148,584 1,241,189 0.2
Telecommunications 2,032,280 STET, Di Risp (Non Conv.) 4,123,619 3,355,404 0.7
Utilities--Gas 147,200 Italgas (Sud) S.p.A. 412,771 389,546 0.1
Total Investments in Italian Stocks 8,462,410 7,441,888 1.5
Netherlands
Banking 60,250 ABN Amro Bank (Ordinary) 2,030,533 2,187,604 0.4
Beverages 8,504 Heineken Holdings (Class A) 705,797 782,984 0.2
9,000 Heineken N.V. 949,291 935,393 0.2
------------ ------------ -----
1,655,088 1,718,377 0.4
Chemicals 32,500 Akzo N.V. (Ordinary) 3,030,063 3,007,569 0.6
32,600 Dutch State Mining N.V. (Ordinary) 1,695,186 1,702,580 0.3
------------ ------------ -----
4,725,249 4,710,149 0.9
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Industries Shares Held Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
WESTERN EUROPE (concluded)
Netherlands (concluded)
Insurance 79,282 AEGON N.V. (Ordinary) $ 3,874,041 $ 4,185,977 0.8%
89,840 Amev N.V. (Ordinary) 3,571,667 3,962,980 0.8
91,197 Internationale Nederlanden Groep N.V. 3,491,374 3,994,375 0.8
------------ ------------ -----
10,937,082 12,143,332 2.4
Paper & Forest Products 130,477 Koninklijke KNP 2,479,390 2,714,877 0.5
Retail Trade 5,888 De Boer Winkelbedr N.V. 221,972 220,524 0.0
Transportation 192,180 KLM Royal Dutch Airlines 3,769,039 4,218,683 0.8
Total Investments in Dutch Stocks 25,818,353 27,913,546 5.4
Portugal
Building &
Construction 37,800 Sociedade de Construsoes Soares Da Costa S.A. 976,555 838,923 0.2
Total Investments in Portuguese Stocks 976,555 838,923 0.2
Spain
Banking 16,920 Banco Popular Espanol (Ordinary) 1,907,099 1,849,705 0.4
Oil--Related 112,640 Repsol S.A. (Ordinary) 3,018,225 3,166,426 0.6
Real Estate 21,160 Vallehermoso Espanola S.A. 304,926 346,984 0.1
3,527 Vallehermoso Espanola S.A. (New) 43,543 57,836 0.0
------------ ------------ -----
348,469 404,820 0.1
Telecommunications 328,940 Telefonica Nacional de Espana S.A. (Ordinary) 3,958,662 3,922,902 0.8
Utilities 343,000 Fuerzas Electricas de Cataluna, FECSA (Class A) 1,940,025 1,960,070 0.4
Total Investments in Spanish Stocks 11,172,480 11,303,923 2.3
Sweden
Building Related 115,600 ++Svedala Industry 2,053,238 1,830,735 0.4
Metal & Mining 240,460 ++Trelleborg AB (Class B) 1,658,348 1,847,222 0.4
<PAGE>
Pharmaceutical--
Prescription 151,750 Astra 'A' Fria 3,179,941 2,995,078 0.6
Total Investments in Swedish Stocks 6,891,527 6,673,035 1.4
Switzerland
Banking 7,633 Swiss Bank Corp. (Bearer) 2,488,783 2,442,560 0.5
Building Materials 3,341 Holderbank Financiere Glarus AG (Bearer) 1,836,580 1,870,960 0.4
Chemicals 3,862 Ciba-Geigy AG (Registered) 1,855,786 2,013,389 0.4
Electrical Equipment 9,076 BBC Brown Boveri & Cie 5,672,958 6,093,021 1.2
1,638 Landis & Gyr AG (Registered) 634,312 720,720 0.1
------------ ------------ -----
6,307,270 6,813,741 1.3
Food & Beverage 4,928 Nestle AG (Registered) 3,555,996 3,807,701 0.7
Health &
Personal Care 1,535 Roche Holding Genusschein AG 5,598,050 6,155,350 1.2
2,392 Sandoz AG (Registered) 5,509,003 5,772,693 1.1
------------ ------------ -----
11,107,053 11,928,043 2.3
Insurance 495 Baloise Holding Insurance 645,450 838,200 0.2
7,861 Winterthur (Registered) 3,480,329 4,066,757 0.8
------------ ------------ -----
4,125,779 4,904,957 1.0
Machinery 1,568 Sulzer Gebrueder AG (Registered) 803,207 794,453 0.2
Metal & Mining 4,762 Alusuisse-Lonza Holdings (Registered) 1,714,589 1,707,971 0.3
Total Investments in Swiss Stocks 33,795,043 36,283,775 7.1
Turkey
Banking--
International 3,300,000 Yapi Kredi Bankasi A.S. (Ordinary) 1,012,571 1,360,341 0.3
Total Investments in Turkish Stocks 1,012,571 1,360,341 0.3
United Kingdom
Aerospace 1,233,000 Rolls Royce PLC (Ordinary) 2,762,128 3,159,106 0.6
Airlines 572,400 British Airways PLC (Ordinary) 3,011,250 3,560,442 0.7
Banking 403,000 Barclays Bank, Ltd. (Ordinary) 3,111,286 3,485,563 0.7
464,700 National Westminister Bank PLC (Ordinary) 3,521,709 3,833,389 0.8
------------ ------------ -----
6,632,995 7,318,952 1.5
<PAGE>
Beverages 793,000 Grand Metropolitan PLC (Ordinary) 4,963,397 4,803,431 0.9
Building Materials 999,250 Tarmac PLC (Ordinary) 2,248,643 2,101,443 0.4
Consumer--Goods 127,500 Vendome Luxury Group (Units) 700,055 598,583 0.1
Diversified 660,000 BTR PLC (Warrants)(c) 1,298,259 1,231,600 0.2
Electrical Equipment 628,000 General Electric Co., Ltd. PLC (Ordinary) 3,321,592 3,101,777 0.6
Electronics 368,000 Chubb Security Group (Ordinary) 2,021,481 1,986,554 0.4
Foods 243,000 Argyll Group PLC (Ordinary) 983,292 1,000,475 0.2
666,000 Tesco PLC (Ordinary) 1,954,253 1,952,965 0.4
------------ ------------ -----
2,937,545 2,953,440 0.6
Food & Beverage 290,000 Tate & Lyle PLC (Ordinary) 1,703,824 1,743,729 0.3
Insurance 456,300 Commercial Union Assurance Co. PLC (Ordinary) 4,365,810 4,098,608 0.8
Leisure &
Entertainment 243,500 The Rank Organisation PLC (Ordinary) 2,814,188 3,164,471 0.6
220,600 Thorn EMI (Ordinary) 3,274,626 3,082,496 0.6
------------ ------------ -----
6,088,814 6,246,967 1.2
Media/Publishing 481,500 Pearson PLC (Ordinary) 3,865,846 4,303,568 0.8
1,170,000 WPP Group PLC 1,724,335 1,533,501 0.3
------------ ------------ -----
5,590,181 5,837,069 1.1
Oil--Related 552,000 British Petroleum Co., Ltd. 2,603,346 2,726,403 0.5
Retail Trade 318,000 Boots Co. PLC (Ordinary) 2,310,051 2,536,109 0.5
350,000 Dixons Group PLC (Ordinary) 1,294,125 1,394,362 0.3
2,031,600 Sears PLC 3,599,242 3,565,428 0.7
------------ ------------ -----
7,203,418 7,495,899 1.5
Telecommunications 291,500 British Telecommunications PLC (Ordinary) 1,998,497 2,033,361 0.4
Utilities--Gas 730,000 British Gas PLC (Ordinary) 3,521,282 3,529,889 0.7
Total Investments in United Kingdom Stocks
& Warrants 62,972,517 64,527,253 12.5
Total Investments in Western Europe 222,861,761 231,657,581 45.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Value Percent of
Face Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial Paper* $10,321,000 General Electric Capital Corp., 3.20% due 12/01/1993 $ 10,321,000 $ 10,321,000 2.0%
Total Investments in Commercial Paper 10,321,000 10,321,000 2.0
US Government & 15,000,000 Federal Home Loan Bank, 3.01% due 12/13/1993 14,984,950 14,984,950 2.9
Agency Obligations 10,000,000 Federal Home Loan Mortgage Corp., 3.04%
due 12/06/1993 9,995,778 9,995,778 2.0
Federal National Mortgage Association:
10,000,000 3.02% due 12/21/1993 9,983,222 9,982,330 2.0
4,000,000 3.16% due 1/04/1994 3,988,062 3,988,062 0.8
Total Investments in US Government & 38,952,012 38,951,120 7.7
Agency Obligations
Total Investments in Short-Term Securities 49,273,012 49,272,120 9.7
Total Investments $509,581,284 511,775,197 100.4
============
Put Options Purchased (Cost--$549,000)** 184,030 0.0
Call Options Written (Premiums Received--$425,750)*** (605,410) (0.1)
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 1,395,792 0.3
Variation Margin on Stock Index Futures Contracts+++++ 105,892 0.0
Liabilities in Excess of Other Assets (2,882,861) (0.6)
------------ -----
Net Assets $509,972,640 100.0%
============ =====
<FN>
(a)American Depositary Receipt (ADR).
(b)Global Depositary Shares (GDS).
(c)Warrants entitle the Fund to purchase a predetermined number of shares
of common stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
*Commercial Paper is traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Fund.
**Put options purchased as of November 30, 1993 are as follows:
<PAGE>
Par Value Value
Subject (Notes
to Put Issue Cost 1a & 1d)
$ 7,000,000 Ffr currency put option, strike
price 5.84, expiring 1/12/94 $ 24,150 $ 19,180
13,000,000 DM currency put option, strike
price 1.675, expiring 1/12/94 100,750 70,590
50,000,000 Yen currency put option, strike
price 103.60, expiring 1/12/94 392,500 82,500
8,000,000 Nlg currency put option, strike
price 1.885, expiring 1/12/94 31,600 11,760
Total Put Options Written $549,000 $ 184,030
======== =========
***Call options written as of November 30, 1993 are as follows:
Par Value Value
Subject (Notes
to Call Issue Cost 1a & 1d)
$13,000,000 DM currency call option,
strike price 1.774, expiring
1/12/94 $100,750 $ 52,910
50,000,000 Yen currency call option, strike
price 109.50, expiring 1/12/94 325,000 552,500
Total Call Options Written $425,750 $(605,410)
======== =========
See Notes to Financial Statements.
++Non-income producing securities.
++++Forward foreign exchange contracts as of November 30, 1993 are as follows:
<PAGE>
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Note 1c)
A$ 10,450,701 January 1994 $ 6,326
Bef 48,239,100 January 1994 7,744
Chf 14,279,772 January 1994 53,676
DM 16,887,000 December 1993 166,146
DM 32,996,928 January 1994 138,446
Dkr 1,493,052 January 1994 1,321
Pta 745,950,500 January 1994 90,876
Fim 16,606,018 January 1994 22,615
Frf 77,584,430 January 1994 65,037
Nlg 11,377,200 December 1993 87,816
Nlg 15,696,954 January 1994 48,304
Yen 11,143,590,000 January 1994 696,338
Skr 8,491,676 January 1994 11,147
Total (US Commitment--$181,020,000) $1,395,792
----------
Total Unrealized Appreciation on
Forward Foreign Exchange Contracts $1,395,792
==========
+++Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $8,485,000, representing 1.66% of
net assets.
Acquisition Value
Issue Date Cost (Note 1a)
Fomento Economico Mexicano S.A.
de C.V. (Femsa)(Class B)(ADR) 8/13/93 $2,097,877 $2,334,301
Grupo Financiero Bancomer, S.A. de
C.V. (ADR) 8/13/93 499,800 518,175
Grupo Posadas S.A. de C. V. (GDS) 10/26/93 374,750 368,000
Servicios Financieros Quadrum,
S.A. de C.V. (ADR) 9/15/93 1,982,811 2,552,063
Telecomunicacoes Brasileiras, S.A.--
Telebras PN (Preferred)(ADR) 8/25/93 2,478,840 2,712,612
Total $7,434,078 $8,485,151
========== ==========
+++++Stock index futures contracts as of November 30, 1993 were as follows:
Number of Expiration Value
Contracts Issue Date (Note 1e)
150 Nikkei 225 3/11/94 $11,414,691
Total Stock Index Futures Contracts
(Total Contract Price--$11,308,799) $11,414,691
===========
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of November 30, 1993
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$509,581,284) (Note 1a) $511,775,197
Variation margin on stock index futures contracts (Note 1e & 5) 105,892
Put options purchased, at value (cost--$549,000) (Notes 1a & 1d) 184,030
Unrealized appreciation on forward foreign exchange contracts (Note 1e) 1,395,792
Foreign cash (Note 1c) 7,703,024
Cash 113,690
Receivables:
Capital shares sold $ 8,484,189
Securities sold 8,089,144
Dividends 575,193 17,148,526
------------
Deferred organization expenses (Note 1h) 68,350
Prepaid registration fees and other assets (Note 1h) 64,600
------------
Total assets 538,559,101
------------
Liabilities: Call options written, at value (premiums received--$425,750) (Notes 1a & 1d) 605,410
Payables:
Securities purchased 25,960,304
Capital shares redeemed 595,532
Distributor (Note 2) 356,335
Investment adviser (Note 2) 321,370 27,233,541
------------
Accrued expenses and other liabilities 747,510
------------
Total liabilities 28,586,461
------------
Net Assets: Net assets $509,972,640
============
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited number of
Consist of: shares authorized $ 1,080,513
Class B Shares of beneficial interest, $0.10 par value, unlimited number of
shares authorized 3,872,793
Paid-in capital in excess of par 499,807,624
Accumulated investment loss--net (441,018)
Undistributed realized capital gains on investments and foreign currency
transactions--net 2,518,301
Unrealized appreciation on investments and foreign currency transactions--net 3,134,427
------------
Net assets $509,972,640
============
Net Asset Value: Class A--Based on net assets of $111,454,110 and 10,805,129 shares of
beneficial interest outstanding $ 10.31
============
Class B--Based on net assets of $398,518,530 and 38,727,929 shares of
beneficial interest outstanding $ 10.29
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period
July 30, 1993++
to November 30, 1993
<S> <S> <C> <C>
Investment Dividends (net of $140,660 foreign withholding tax) $ 1,244,092
Income Interest and discount earned 772,879
Notes (1f & 1g): ------------
Total income 2,016,971
------------
Expenses: Distribution fees--Class B (Note 2) 926,816
Investment advisory fees (Note 2) 910,109
Custodian fees 305,805
Transfer agent fees--Class B (Note 2) 102,182
Maintenance fees--Class A (Note 2) 71,666
Registration fees (Note 1h) 53,529
Printing and shareholder reports 27,030
Transfer agent fees--Class A (Note 2) 25,342
Accounting services (Note 2) 16,960
Trustees' fees and expenses 7,950
Professional fees 5,830
Amortization of organization expenses (Note 1h) 3,180
Other 1,590
------------
Total expenses 2,457,989
------------
Investment loss--net (441,018)
------------
Realized and Realized gain from:
Unrealized Gain on Investments--net $ 132,201
Investments & Foreign currency transactions 2,386,100 2,518,301
Foreign Currency ------------
Transactions--Net Unrealized appreciation on:
(Notes 1c, 1g & 3): Investments--net 2,299,805
Foreign currency transactions 834,622 3,134,427
------------ ------------
Net realized and unrealized gain on investments and foreign currency
transactions 5,652,728
------------
Net Increase in Net Assets Resulting from Operations $ 5,211,710
============
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
July 30,1993++
Increase (Decrease) in Net Assets: to November 30, 1993
<S> <S> <C>
Operations: Investment loss--net $ (441,018)
Realized gain on investments and foreign currency transactions--net 2,518,301
Unrealized appreciation on investments and foreign currency transactions--net 3,134,427
------------
Net increase in net assets resulting from operations 5,211,710
------------
Beneficial Interest Net increase in net assets derived from beneficial interest transactions 504,660,930
Transactions ------------
(Note 4):
Net Assets: Total increase in net assets 509,872,640
Beginning of period 100,000
------------
End of period* $509,972,640
============
<FN>
*Accumulated investment loss--net $ (441,018)
============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
Class A Class B
The following per share data and ratios have been derived from For the Period For the Period
information provided in the financial statements. July 30, July 30,
1993++ to 1993++ to
Increase (Decrease) in Net Asset Value: Nov. 30, 1993 Nov. 30, 1993(1)
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00
Operating ------------ -----------
Performance: Investment income (loss)--net .01 (.01)
Realized and unrealized gain on investments and foreign currency
transactions--net .30 .30
------------ -----------
Total from investment operations .31 .29
------------ -----------
Net asset value, end of period $ 10.31 $ 10.29
============ ===========
Total Investment Based on net asset value per share 3.10%+++ 2.90%+++
Return:** ============ ===========
<PAGE>
Ratios to Expenses, excluding account maintenance and distribution fees 1.19%* 1.21%*
Average ============ ===========
Net Assets: Expenses 1.44%* 2.21%*
============ ===========
Investment income (loss)--net .26%* (.56)%*
============ ===========
Supplemental Net assets, end of period (in thousands) $ 111,454 $ 398,519
Data: ============ ===========
Portfolio turnover 17.31% 17.31%
============ ===========
<FN>
(1)Based on average shares outstanding during the period.
++Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch International Equity Fund (the "Fund") is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. The shares of the Fund are divided into Class A Shares
and Class B Shares. Class A Shares are sold with a front-end sales charge.
Class B Shares may be subject to a contingent deferred sales charge. Both
classes of shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that Class A Shares bear
the expenses of the ongoing account maintenance fee and except that Class B
Shares bear certain expenses related to the distribution of such shares and
have exclusive voting rights with respect to matters relating to such
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Portfolio securities which are traded on
stock exchanges are valued at the last sale price on the principal market
on which such securities are traded, as of the close of business on the day
the securities are being valued or, lacking any sales, at the last available
bid price. Securities traded in the over-the-counter market are valued at
the last available bid price in the over-the-counter market prior to the
time of valuation. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated by or under
the authority of the Board of Trustees as the primary market. Short-term
securities are valued at amortized cost, which approximates market value.
Options written by the Fund are valued at the last asked price in the case
of exchange-traded options or, in the case of options traded in the over-
the-counter market, the average of the last asked price as obtained from
one or more dealers. Options purchased by the Fund are valued at their
last bid price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the average of the last bid
price as obtained from two or more dealers, unless there is only one dealer,
in which case that dealer's price is used.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees of the Fund.
(b) Repurchase agreements--The Fund invests in US Government securities
pursuant to repurchase agreements with a member bank of the Federal Reserve
System or a primary dealer in US Government securities. Under such
agreements, the bank or primary dealer agrees to repurchase the security at
a mutually agreed upon time and price. The Fund takes possession of the
underlying securities, marks to market such securities and, if necessary,
receives additions to such securities daily to ensure that the contract is
fully collateralized.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are
the result of settling (realized) or valuing (unrealized) such transactions
expressed in foreign currencies into US dollars. Realized and unrealized
gains or losses from investments include the effects of foreign exchange
rates on investments.
The Fund is authorized to enter into forward foreign exchange contracts
as a hedge against either specific transactions or portfolio positions.
Such contracts are not entered on the Fund's records. However, the effect
on operations is recorded from the date the Fund enters into such contracts.
Premium or discount is amortized over the life of the contracts.
<PAGE>
(d) Options--The Fund can write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect
the current value of the option written.
When a security is sold through an exercise of an option, the related
premium received (or paid) is deducted from (or added to) the basis of
the security sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent
the cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(e) Futures contracts--The Fund may purchase or sell futures contracts
and options on such futures contracts. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by
the Fund as unrealized gains or losses. When the contract is closed, the
Fund records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at
the time it was closed.
(f) Income taxes--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends,
and capital gains at various rates.
(g) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates except that if the ex-
dividend date has passed, certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date. Interest
income (including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are determined on
the identified cost basis.
(h) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are charged to expense on a straight-line basis over
a five-year period. Prepaid registration fees are charged to expense as the
related shares are issued.
(i) Dividends and distributions--Dividends and distributions paid by the
Fund are recorded on the ex-dividend dates.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill
Lynch Asset Management ("MLAM"). MLAM is the name under which Merrill Lynch
Investment Management, Inc. ("MLIM") does business. MLIM is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. The Fund has also
entered into Distribution Agreements and a Distribution Plan with Merrill
Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of MLIM.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such services,
the Fund pays a monthly fee of 0.75%, on an annual basis, of the average
daily value of the Fund's net assets. MLAM has entered into a Sub-Advisory
Agreement with Merrill Lynch Asset Management U.K., Ltd. ("MLAM U.K."),
an affiliate of MLAM, pursuant to which MLAM pays MLAM U.K. a fee in an
amount to be determined from time to time by the Investment Adviser and
MLAM U.K. but in no event in excess of the amount that the Investment
Advisor actually receives. For the period July 30, 1993 to November 30,
1993, MLAM paid MLAM U.K. a fee of $86,994 pursuant to such Agreement.
Certain of the states in which the shares of the Fund are qualified for
sale impose limitations on the expenses of the Fund. The most restrictive
annual expense limitation requires that the Investment Adviser reimburse
the Fund to the extent the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net assets,
2.0% of the next $70 million of average daily net assets, and 1.5% of the
average daily net assets in excess thereof. MLAM's obligation to reimburse
the Fund is limited to the amount of the management fee. No fee payment
will be made to MLAM during any fiscal year which will cause such expenses
to exceed the most restrictive expense limitation at the time of such
payment.
Effective January 1, 1994, the investment advisory business of MLAM
reorganized from a corporation to a limited partnership. The general
partner of MLAM is Princeton Services, Inc., an indirect wholly-owned
subsidary of Merrill Lynch & Co.
<PAGE>
The Fund has adopted separate Plans of Distribution (the "Distribution
Plans") for Class A and Class B Shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940 pursuant to which MLFD receives from the
Fund at the end of each month (a) an account maintenance fee, at an annual
rate of 0.25% of the average daily net assets of the Fund's Class A Shares
in order to compensate the Distributor and Merrill Lynch (pursuant to a sub
agreement) in connection with account maintenance activities, and (b) an
account maintenance fee and a distribution fee at the annual rates of 0.25%
and 0.75%, respectively, of the average daily net assets of the Fund's
Class B Shares in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) for the services it provides and the expenses
borne by the Distributor under the Distribution Agreement. As authorized by
the Distribution Plans, the Distributor has entered into an agreement with
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), an affiliate of MLAM,
which provides for the compensation of MLPF&S in connection with account
maintenance activities for Class A Shares and for providing distribution-
related services to the Fund for Class B Shares. For the period ended
November 30, 1993, MLFD earned $71,666 and $926,816 for Class A and Class B
Shares, respectively, under the Distribution Plans, all of which was paid
to MLPF&S pursuant to the agreement.
For the period ended November 30, 1993, MLFD earned underwriting discounts
of $119,814, and MLPF&S earned dealer concessions of $2,693,159, on sales
of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $42,743 relating
to transactions in Class B Shares and $75,217 in commissions on the
execution of portfolio security transactions for the Fund during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of Merrill
Lynch & Co., Inc., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the period from July 30, 1993 (commencement of
operations) to November 30, 1993 were $499,746,952 and
$39,569,757, respectively.
<PAGE>
Net realized and unrealized gains (losses) as of November 30,
1993 were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 131,077 $ 2,194,805
Short-term investments 1,124 (892)
Foreign currency transactions (553,658) (16,540)
Options written -- (179,660)
Options purchased (40,950) (364,970)
Forward foreign exchange contracts 2,980,708 1,395,792
Stock index futures contracts -- 105,892
------------ ------------
Total $ 2,518,301 $ 3,134,427
============ ============
Transactions in put options purchased for the period ended
November 30, 1993 were as follows:
Par Value Premiums Paid
Outstanding put options purchased
at beginning of period -- --
Options purchased $ 91,000,000 $ 589,950
Options expired (13,000,000) (40,950)
------------ ------------
Outstanding put options purchased
at end of period $ 78,000,000 $ 549,000
============ ============
Transactions in call options written for the period ended November
30, 1993 were as follows:
Par Value
Covered by Premiums
Written Options Received
Outstanding call options written
at beginning of period -- --
Options written $ 63,000,000 $ 425,750
------------ ------------
Outstanding call options written
at end of period $ 63,000,000 $ 425,750
============ ============
As of November 30, 1993, net unrealized appreciation for Federal
income tax purposes aggregated $2,193,913, of which $26,215,519
related to appreciated securities and $24,012,606 related to
depreciated securities. At November 30, 1993, the aggregate cost
of investments for Federal income tax purposes was $509,581,284.
<PAGE>
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $504,660,930 for the period ended November 30,
1993.
Transactions in shares of beneficial interest for Class A and
Class B Shares were as follows:
Class A Shares for the Period Dollar
July 30, 1993++ to November 30, 1993 Shares Amount
Shares sold 12,235,764 $124,392,649
Shares redeemed (1,435,635) (14,651,914)
------------ ------------
Net increase 10,800,129 $109,740,735
============ ============
[FN]
++Prior to July 30, 1993 (commencement of operations), the Fund
issued 5,000 shares to MLAM for $50,000.
Class B Shares for the Period Dollar
July 30, 1993++ to November 30, 1993 Shares Amount
Shares sold 39,776,122 $405,677,927
Shares redeemed (1,053,193) (10,757,732)
------------ ------------
Net increase 38,722,929 $394,920,195
============ ============
[FN]
++Prior to July 30, 1993 (commencement of operations), the Fund
issued 5,000 shares to MLAM for $50,000.
5. Commitments:
At November 30, 1993, the Fund had entered into forward foreign
exchange contracts under which it had agreed to purchase and
sell various foreign currency with an approximate value of
$1,055,000 and $89,000, respectively.
<PAGE>
PORTFOLIO INFORMATION
Worldwide Investments as A Percentage
of Net Assets as of November 30, 1993
Percent of
Asset Mix Net Assets
Europe (Ex United Kingdom) 32.8%
Japan 22.9
Pacific Basin (Ex Japan) 14.7
United Kingdom 12.5
Other Emerging Markets 7.4
Cash 9.7
Percent of
Country Breakdown* Net Assets
Japan 22.9%
United Kingdom 12.5
Hong Kong 8.5
Germany 7.2
Switzerland 7.1
Mexico 6.1
Netherlands 5.4
France 3.5
Australia 3.1
Spain 2.3
Percent of
Ten Largest Industries Net Assets
Insurance 10.5%
Banking 9.0
Telecommunications 5.8
Electrical Equipment 4.6
Beverages 3.9
Health & Personal Care 3.1
Chemicals 3.0
Automobiles 2.9
Diversified 2.7
Building & Construction 2.7
[FN]
*Percent of net assets may not equal 100%.
<PAGE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Merrill Lynch International Equity Fund Management Team
Andrew John Bascand--Senior Portfolio Manager/Asset Allocator. As
the Fund's Asset Allocator, Mr. Bascand is primarily responsible
for determining the allocation of the Fund's assets among equity
markets in Europe, Latin America and the Pacific Basin.
Adrian Holmes--Co-Portfolio Manager--European Investments. Mr.
Holmes is primarily responsible for the Fund's European
investments.
Grace Pineda--Co-Portfolio Manager--Emerging Markets Investments.
Ms. Pineda is primarily responsible for investments in emerging
markets in Europe, Asia and Latin America.
Stephen I. Silverman--Co-Portfolio Manager--Pacific Basin
Investments. Mr. Silverman is primarily responsible for the
Fund's Pacific Basin investments.
<PAGE>
APPENDIX: Item 1. International Stock Market Performance
A bar graph depicting the total returns in US Dollars* of the
Fund's top ten country positions for the four-month period ended
November 30, 1993.
Japan -19.0%
France +4.8%
Australia +7.7%
United Kingdom +9.0%
Spain +12.3%
Holland +14.0%
Switzerland +16.5%
Germany +16.6%
Mexico +29.7%
Hong Kong +34.6%
